Trading in a Car Cost

How Much Does Trading in a Car Cost?

When buying a new or used car from an auto dealership, many consumers choose to trade in their old vehicle as part of the purchase because the trade-in process is relatively quick and convenient, and less work than arranging to sell the old car on their own.

Typical costs:

The trade-in value is typically $1,000-$4,000 less than what the selling price might be from a private sale on the open market. Dealers generally pay wholesale prices for trade-in vehicles, then resell them at retail prices.

For example, Edmunds.com[1] estimates that a white 2008 Toyota Camry 5-speed Automatic Sedan in clean condition with 70,000 miles on it will retail for $11,283 at a dealership , sell for $10,083 in a private-party sale or have a trade-in value of $8,857; while a silver 2008 Lexus LS460 L sedan in clean condition with 70,000 miles is estimated at $29,775 for dealer retail; $27,243 for a private-party sale; and $24,948 trade-in value.

Trade-in value may also be affected by the current demand for that particular year, make and model of vehicle, and what the dealer already has on the lot; if the dealership currently has several used white Camrys to sell, the trade-in on a white Camry will be lower than if the dealer has none in inventory and it's a popular color and style of used car.

A dealership may advertise that it will pay off the old vehicle loan no matter what amount is still owing, or pay more than the original MSRP (retail price). However, the dealership still sets a trade-in value on the vehicle, and if the payoff value is more than the trade-in value, the remaining amount due is added into the loan for the new vehicle. The buyer then makes payments and pays interest based on the total amount -- both the purchase price for the new car and the remaining amount due on the trade-in vehicle. CarsDirect.com describes this and other possible hidden costs of trading in a car[2] .

Typically the dealership's used car manager might drive a potential trade-in vehicle a short distance, check the paint and bodywork for signs of damage, pop the hood to check condition and fluid levels, run the vehicle's VIN number through Carfax to get a vehicle history report, and check references like Kelley Blue Book or the Black book as a guide to setting the trade-in price.

Be wary if the dealer provides a trade-in value without looking at the vehicle, and says the price is good only if the car passes inspection. This could be a set-up for negotiating the deal with a high trade-in value, then later on lowering the price allowed for the trade-in. CarsDirect.com describes common trade-in price scams[3] .

Additional costs:

It's important to remove all personal items and clean the potential trade-in vehicle both inside and out just before taking it to a dealership to be appraised; a car that looks better, sells better. Consider having it professionally detailed. A wax and wash can cost $20-$150, while a standard detailing is typically $100-$300.

Most dealers charge a documentation fee on each new vehicle sold, for processing documents that establish title and registration (the actual title and registration costs are billed separately). A dealership might increase the documentation fee when there is a trade-in. Consumer Reports[4] says $50 or less is a reasonable charge, and buyers should question any documentation fees higher than $100.

Discounts:

A used vehicle is worth more to a dealer who sells that brand of car than to a dealer who sells a different brand. For example, before trading in a Ford SUV at a Toyota dealership, see how much the Ford dealer will pay outright for the old vehicle; if it's a good price, sell to the Ford dealer and buy the new Toyota separately.

Shopping for trading in a car:

Before visiting the car dealership, check the value of the potential trade-in vehicle using Kelley Blue Book[5] , Nada Car Guides[6] , or Black Book[7] . Also research private seller asking prices for similar vehicles on sites like craigslist[8] or autotrader[9] .

If possible, choose the best time of year to do a trade-in, depending on the type of vehicle; a convertible might command a higher price in early spring when people start spending more time outdoors, and an off-road, four-wheel-drive vehicle might sell best in the cold winter months.

Don't talk about the trade-in value until after reaching agreement on the final purchase price of the new vehicle; keep the negotiations separate, because a dealership might increase the purchase price to offset a high trade-in value. Bankrate.com lists tips for negotiating a car trade-in[10] .

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